A class-action lawsuit about stock pricing may influence the potential combination of the owner of the largest forklift manufacturer and the largest load-engagement maker.

On 2 November, a subsidiary of Toyota Industries Corp (TICO) began a tender offer to acquire attachments manufacturer Cascade Corp. The offer is scheduled to expire on 3 December unless extended.

On 22 October, TICO and Cascade said they had entered into a definitive agreement under which TICO would acquire Cascade for USD759 million. Trading in Cascade stock began in 1965.

Class-action lawsuit

On 2 November, a putative shareholder class action complaint was filed in the Circuit Court of the State of Oregon for the County of Multnomah (in Portland), captioned Joseph Polyak v. Robert C Warren Jr et al, Case No.1211-13933, Cascade says in a security filing.

Defendants include Cascade, TICO subsidiary Industrial Components and Attachments II Inc and seven individuals as Cascade directors.

"The complaint alleges generally that individual defendants have breached their fiduciary duties (and that Cascade and the TICO subsidiary) aided and abetted the purported breaches of fiduciary duties. . . by attempting to sell Cascade to TICO by means of an unfair process and for an unfair price." TICO of Kariya plans to purchase 100% of the shares of Cascade for USD65 each, representing a 23% premium over Cascade's volume-weighted average share price for the 60 days ended 19 October.

The plaintiff is seeking an "injunction prohibiting consummation of the proposed transaction, rescission (to the extent the proposed transaction has already been consummated), accounting to plaintiff and other members of the class for damages caused as a result of any breach of fiduciary duties and the payment of plaintiff's attorneys' fees and costs".

Other law firms among those investigating the TICO-Cascade deal include Brodsky & Smith LLC of Bala Cynwyd, Pennsylvania; the law offices of Todd Garber of Los Angeles; the law offices of Howard G Smith of Bensalem, Pennsylvania; and Ryan & Maniskas LLP of Wayne, Pennsylvania.

Speculation about customer views

Observers wonder about the TICO plan to maintain separate reporting lines for its extensive Toyota forklift business and the Cascade product business and customer list. A message to Cascade employees says that Cascade "will be a separately operated company owned by TICO, Toyota lift trucks' parent company (and that Toyota forklifts) will not receive any competitive preference or advantage as a result of our new ownership".

Speculation exists about whether equipment manufacturers competing with Toyota will want to buy materials handling load engagement products from Cascade as a sister unit of the Toyota forklift business.

The situation could benefit publicly traded attachments maker Bolzoni SpA of Casoni di Podenzano, Italy. Bolzoni had 2011 sales of EUR115.8 million (USD150 million), and Cascade reported sales of USD535.8 million for the fiscal year ended 31 January.

Family connections

Warren became Cascade chief executive officer and president in 1996 and has agreed to continue running the business after the deal closes. Warren was president and chief operating officer from 1993-1996 and was formerly vice president for marketing. He joined Cascade in 1972.

Warren and Warren Holdings LLC, a family-managed limited liability company, have entered into an agreement with TICO to support the transaction and to tender their shares in the offer. The Warrens control approximately 14% of Cascade's outstanding shares.

Cascade was organised in 1943 with the current CEO's father as its first president and the CEO's entrepreneurial grandfather, Ernest (Ernie) Goodnough Swigert, as a major player.

"In 1943, Ernie Swigert participated in founding Cascade Corp, specialising in manufacturing lift truck attachments. Son-in-law Robert Warren became Cascade Corp's first president," according to a history of ESCO Corp, a Portland-based designer and manufacturer of highly engineered wear parts and replacement products.

"The (Cascade) concept was really by five managers at a local steel foundry who made castings," says Robert C Warren Jr in a Cascade video. "In 1943, they decided to start a company. They were a general machine shop for 10 years."

Earlier, Swigert created the foundation of Hyster Co.

"In 1929, Ernie Swigert became president of an ESCO spin-off concern specialising in manufacturing hoists and logging arches," the ESCO history says. "Originally called Willamette-Ersted Manufacturing, the company was renamed Hyster Co and became a world leader in lift trucks and materials handling equipment. Under Ernie Swigert's leadership, Hyster would eventually become a Fortune 500 company with annual sales in excess of $650 million and more than 8,000 employees worldwide."

Today, Hyster is a brand of publicly-traded Hyster-Yale Materials Handling Inc.

Related next steps

On 5 November, Fairview-based Cascade announced its board of directors declared a regular quarterly dividend of USD0.35 per share, payable on 26 November to shareholders of record as of 15 November.

Shareholders on the record date "will receive the dividend even if their shares have been tendered pursuant to the tender offer" of TICO and its subsidiary Industrial Components.

Unless the class action gains traction, the TICO-Cascade transaction is projected to close by the end of December.